HDTV Almanac

Netflix subscribers are shocked, shocked to discover that Blu-ray discs cost the company more than standard DVDs, and that Netflix is increasing their subscription fees for those users who want to receive their movies in high-definition. Reaction to the announcement made in the company blog yesterday generated hundreds of angry comments from subscribers.

The increase is modest, by my measure. Fees will increase by $1 plus $1 for each unlimited DVD out-at-a-time in your subscription. If you get one at a time, it costs $2 more a month; two at a time, $3 more. And so on. At retail, a Blu-ray disc typically costs about $10 more than the standard DVD disc. I don’t know what Netflix is paying — they probably get an excellent discount based on their volume — but I wouldn’t be surprised if the Blu-ray price is as much as 60% higher than the standard price.

I am not a Netflix subscriber, but this is not a company that appears to nickel and dime its customers. I don’t believe that they’ve raised their rates lately, in spite of postage increases. And they don’t charge anything extra for unlimited access to their streaming downloads on the Internet. (Blockbuster charges per movie for downloads .) Sure, it would be nice for Netflix to offer high definition movies at no additional cost, but I doubt that they can afford to keep adding free bonuses indefinitely. Yes, the Blu-ray surcharge does add about 20% to your subscription cost, but it’s optional. You can choose to just get the standard DVDs and not pay anything extra if you prefer. I think Netflix has been fair in this situation, and still offers a great value.

The FCC apparently has decided that it would be helpful to have “boots on the ground” in 49 major metropolitan areas to help residents make the transition to digital broadcasts by the June 12 deadline. According to a press release from AmeriCorps National Civilian Community Corps (NCCC) on Friday, its members “will focus on groups the FCC has targeted for special attention, including low-income individuals, minority communities, non-English speaking consumers, senior citizens, consumers with disabilities and individuals living in rural areas or tribal lands.”

AmeriCorps is a “Peace Corps” type government program that enlists volunteers between 18 and 24 to help with domestic programs. The members of this residential program are based in five campuses spread across the country. Members make a ten-month commitment, and receive training before being sent out in teams of 10 to 12 members to help with programs around the U.S.

Teams of AmeriCorps members will work with FCC area coordinators to “to visit homes where individuals need help to connect their antennas and analog televisions to digital converter boxes, help consumers apply for the $40 converter box coupons, make presentations at community events, serve in walk-in DTV help centers and otherwise spread the word.” According to the press release, Denver is targeted for the initial roll-out of this collaborative effort between the FCC and AmeriCorps, because several of the Denver stations are slated to end their analog broadcasts early, in April.

This is clearly a good idea, but the timing is weak at best. We are now nearly two months past the original deadline, and yet the FCC is only now thinking about using AmeriCorps? The press release indicates that the FCC intends to mobilize other groups, such as the International Association of Fire Chiefs, but why did they wait until 10 weeks before the cut-off to start organizing these groups? And the press release does not indicate how many teams of AmeriCorps members will be involved in these 49 different markets, but how many housecalls can one person make in a day? I expect that 10 would be an ambitious goal. If half of the 4 million unprepared households are in these target markets, and we assume that these groups start today, they would have about 50 days to reach 2 million households. It would take at least 4,000 volunteers to manage that. The program does apparently have about 40,000 members, but presumably most are already committed to other programs.

I hope that this works, and that other state and local community government and private organizations will be able to enlist additional volunteers to help others with the transition, but it remains an enormous task. Waiting until the 11th hour like this does not bode well for success.

I get it. CEA stands for “Consumer Electronics Association”, and in addition to hosting the CES conference in Las Vegas every January, the organization provides “representation from the voice of the industry, CEA, promoting and advancing member needs and interests.” And those 2,200 members are companies within the consumer technology industry. So I get it; the CEA is a cheerleader for its industry.

But I still have a difficult time swallowing some of their pronouncements. Yesterday’s press release is no exception: “I remain convinced that the nation will be fully prepared for a successful and consumer-friendly transition on June 12th, said Consumer Electronics Association (CEA) President and CEO Gary Shapiro.” He was testifying before Congress when he made this statement. The press release also goes on to state that he “outlined the vast number of consumer educational efforts that CEA and industry partners have participated in for more than a decade, ensuring the nation is prepared for this historic transition.”

Excuse me? The nation is prepared? The only numbers I’ve seen lately are that we still have more than 4 million U.S. households that are totally unprepared for the end of analog broadcasts. This is down from more than 13 million a year ago, but the pace of converting the unprepared to prepared is slowing down dramatically as we get closer to the June 12 transition deadline. If Shapiro is saying that we’ll be 100% prepared in the next two months, that’s just not credible. And if he’s saying that 4 million unprepared households is acceptable in order for the nation to be “fully prepared”, I suspect that more than a few consumer advocates might disagree with him. It would seem that he’s willing to accept a large number of unprepared households, as the press release states that “he explained that the country and the industry were ready for the original February 17 transition date.”

From where I sit, the country is not ready for the transition, and if analog broadcasts ended today, millions of people would lose access to news and entertainment that they currently get from the free analog television broadcasts. I understand that the CEA may feel obligated to put a bright spin on the situation, but a polyannish polish of the situation as presented in this press release does not help consumers or companies in the long run.

Apparently there has been a flurry of complaints about the Netflix streaming video service. Some users have encountered problems just with HD streams, while others have had problems with choppy performance even on SD titles. The company responded with considerable candor in a blog entry last week in which Neil Hunt, Chief Product Officer, addressed some of the concerns.

Basically, the company acknowledges that users in different areas may have different experiences with the service due to relative traffic loads and Internet congestion around the individual servers that are spread around the country. And the ISPs have different routing which can result in different performance within the same geographical area. And the end user hardware can also play a role in how efficiently the content is decoded. Netflix is working to incorporate multisource content delivery so that other servers can be used to provide load leveling in areas of higher demand or congestion.

The posting also points out that activities within the home can affect performance. If multiple computers are connected to a broadband service — as is often the case these days in many homes — the actions on one computer can affect performance on another. If someone is uploading a large file on one computer while someone else is trying to use the Netflix streaming service at the same time, then the Netflix performance may be compromised.

One point that the post makes is that Netflix is not throttling the streaming data selectively for some users. According to Hunt, “there is no purposeful discrimination between different clients – we want them all to perform very well.”

We’re in the early days of video delivery over the Internet, and it’s still not clear that the existing infrastructure is capable of handling its success. We have not yet resolved whether or not ISPs should be allowed to modify the data speeds for some users because they make heavy use of the system. And we have not yet reached the point where more people are watching the SuperBowl on their computer than on cable, satellite, or broadcast television. But that day will come eventually. Between now and then, we can expect to encounter some of the growing pains that some Netflix subscribers are experiencing now.

In a press release yesterday, the National Telecommunications and Information Administration (NTIA) announced that it had cleared the backlog of rebate coupon requests for digital converter boxes, and is accepting new applications. For the first time, the agency is also accepting applications from households who received rebate coupons, but who failed to redeem them before their 90-day expiration. If you received two coupons and used one but the other has expired, you can still apply to replace the expired one.

The NTIA is now mailing the coupons by first class mail, so applicants should receive them more quickly. The press release cited a nine-business-day turnaround for fulfilling coupon applications. The NTIA also emphasizes that consumers should set up and test their converter boxes as soon as they buy them, so that they can make sure that they are working properly before the cut-off date. Here are the details for applying for a new or replacement rebate coupon:

Households may apply for coupons online at www.DTV2009.gov, by phone at 1-888-DTV-2009 (1-888-388-2009), via fax at 1-877-DTV-4ME2 (1-877-388-4632) or by mail to P.O. Box 2000, Portland, OR 97208-2000. Deaf or hard of hearing callers may dial 1-877-530-2634 (English TTY) or 1-866-495-1161 (Spanish TTY). Nursing home residents may apply with the paper application available downloadable at www.DTV2009.gov. For more information about the Coupon Program, please visit www.DTV2009.gov and for questions about the DTV transition, go to www.dtv.gov or call 1-888-CALL-FCC.

This news — coupled with the optimistic numbers reported by Nielsen — may mean that even more U.S. viewers will be ready when the analog broadcasts stop on June 12. I still expect millions of low-income and elderly viewers to be unprepared, and hope that local government and private groups will make an effort to make sure that such members in their community get the help they need to get ready for the transition.

Nielsen has posted their latest estimate of how many U.S. households remain unprepared for the end of analog TV broadcasts in June. With just over two months left to go, the number of households has been cut nearly in half from December to now, leaving only 4.1 million homes still not ready according to Nielsen; this is 3.6% of the national total. That represents more than a million homes per month have gone from unprepared to at least partially prepared since December.

I’m now ready to say that I was wrong, at least in part, if Nielsen’s numbers are accurate. One of the most startling figures is that the population segment showing the most improvement was the “Over 55″ portion. They’ve gone from 5.2% unprepared in December to just 2.0% in March. I’ve been particularly concerned about the elderly making the transition smoothly, and it would appear that the situation is better than I expected. (It’s not clear whether the Nielsen numbers include those residents of elderly group homes that do not provide cable service; this could amount to a sizable number.) And I thought that we would not see a lot of change between February and June, which is why Congress delayed the transition. The trajectory of the improvement is definitely flattening out, so we may not see as much change in the next two months as we’ve seen in the last two, but the situation is still improving.

On the other hand, I continue to be concerned about the low-income population. According to Nielsen’s numbers, Hispanic households have only gone from 11.5% unprepared in December to 6.1% unprepared in March. That’s a big percentage drop, but the remainder is much higher than the national average. And for African American households, the drop has been from 10.8% to 6.6%. I expect that the rate of change for these two segments is likely to go flat over the next two months, and these people will be disproportionately unprepared for the end of analog broadcasts. I expect that there is also a correlation between income level and the unprepared portion of these groups, though Nielsen doesn’t report on this factor. While I don’t believe that having free television broadcasts is a fundamental right of U.S. citizens, I do believe that television provides an important source of news and information, and so it is in society’s interest as a whole to do what we can to see that these people aren’t left out by the transition.

DisplaySearch tracks the production of flat panel displays, and in a press release last week, the company released statistics for the LCD TV panel shipments in February. They report that 7.7 million panels shipped in February, compared with 6.9 million in January; this amounts to an 11% gain from month to month. The rest of the story, however, is that this compares with 8.1 million panels shipped in February 2008, which means this year’s numbers represent a 6% drop over the shipments a year ago. For the LCD panel market as a whole, the swings are wider: up 23% month to month but down 17% year over year. This was the first time in six months than shipments increased from month to month.

A year ago, we had not entered the worldwide recession, and companies were still building for the ever-increasing consumer demand. This led to enormous inventory surpluses and prices crashed last winter. The manufacturers have scaled way back on production, in an attempt to let some of that inventory clear the retail pipeline. These latest numbers indicate that they may have been somewhat successul at shrinking the supply surplus, and are slowing starting to ramp up production again. This likely indicates that we now will see LCD TV prices stabilize, as the supply becomes closer to the demand.

TWICE ran a story this week about “a new start-up LCD TV brand, Naxa Electronics“. None of the sets mentioned in the company’s new line-up are larger than 26″, and some are as small as 13″ which gives new meaning to the concept of a “personal” HDTV. The sets have some strange panel resolutions, such as 1280 by 800 pixels or 1440 by 900 pixels, which indicates that the company probably got some good deals on computer monitor panels to use for their televisions.

But the Naxa line has two additional noteworthy features. Many of them include a built-in DVD player, which can be handy but is not unique. The special feature is that they can run on either 120 volt AC household current, or 12 volt DC current from a car or boat electrical system. This means that they are not battery operated, but they may be suitable as emergency TVs as you can run them off a car battery or even one of those “hot shot” car starter batteries.

Note that Naxa apparently is not that new in spite of the TWICE report. Amazon lists at least one TV from the company that was first listed in 2005. I suspect that part of the problem is that it’s difficult for companies to get retail distribution for their products, which can lower their visibility in the marketplace. Surprisingly, the Naxa TVs appear to be marketed through truck stops; the small size and 12 volt support makes them well suited to the entertainment needs of long-haul truckers. I wonder how many Naxa LCDs are going to be showing “Smokey and the Bandit” tonight at rest stops across the country?

Investor Mark Wattles bought a sizable portion of Circuit City, and tried to influence the company’s direction. One of those steps included lobbying to support Blockbuster’s abortive effort to buy Circuit City last year. There’s a little irony here because Wattles founded Hollywood Video, one of Blockbuster’s competitors, and the sale of that chain to Movie Gallery gave him the resources to fund his investments.

Circuit City has finally closed its doors, and Wattles has returned to the video rental market by buying up nearly 6% of Blockbuster’s stock. This could be viewed as leaving the frying pan for the fire, as Blockbuster faces the expiration of two major credit lines in August of this year. Wattles is betting that the company will be able to find new sources of credit in time.

The fact remains that the transition to electronic delivery of rental movies has already started, and there is clearly pent-up demand among consumers for this type of service. Blockbuster’s major rival, Netflix, is already way out in front in this area, and Blockbuster is going to need a lot of money and some new ideas if they are to catch up. There may be room for both companies in the future, but if only one is left standing, Netflix is the most likely winner.

One reason to get satellite or cable TV service is so that you can watch movies at home. Many people pay these services lots of money each month for premium channels in order to watch recent releases on their TV sets. But here’s an interesting twist; Dish Network is launching a channel that uses Fandango to report back what movies are showing in your neighborhood, including showtimes. It even lets you purchase tickets (though you’ll need to have a phone line connected to your satellite receiver). So you can use your satellite TV service subscription to pay for tickets to go out and see a movie.

If you want to add one more layer of irony to the whole deal, consider this. Dish Network’s partner in this enterprise, Fandango, is owned by the satellite service’s cable rival, Comcast. Like politics, the new world of digital media apparently also makes for strange bedfellows.